Thursday, February 4, 2010

Fixing Tennessee’s Tax System

By Shelby Tabeling

For Tennessee to be a first-class place to live and do business, we must ensure our current and future workforce is educated, our bridges and roads are safe, our rivers and parks are clean, our communities are protected, and our fellow Tennesseans have access to affordable housing and health care.

We collect revenue for valuable public structures we all enjoy and that provide quality of life for each Tennessean — structures like higher education, toll-free roads, fire and police protection, thousands of acres of state parks, and affordable care and assistance when our families face unexpected circumstances.

But times are tough for Tennessee. As the General Assembly enters the 2010 legislative session, Governor Phil Bredesen has warned that in the 2010-11 fiscal year, the state could face a gap of more than $1 billion between the money that’s available from taxes and what’s needed to meet the state’s essential obligations.

In the wake of this crisis, our teachers, students and employees are left scrambling for bits of an ever-dwindling pie. Our legislators and elected officials must look to revenue to solve our state’s budget problems and ensure our public structures are fully funded and our state’s future is secure.

The budget gap exists because of basic flaws in our state’s tax system – our state faced funding problems long before the current national economic crisis. Most states raise money from an equal mix of sales tax, property tax and income tax. Tennessee relies too heavily on just one source of income: sales taxes.

Two-thirds of Tennesseans would receive a tax cut if our elected officials would support the Tax Modernization and Economic Stimulus Act. Furthermore, under this proposal, an additional $1 billion in revenue would be raised by eliminating the sales tax on food, reducing the general sales tax, and implementing a personal income tax.

Tennessee’s tax structure is currently upside-down: With our sales tax on food, we ask those who make the least to pay the most and we ask those who make the most to pay the least. We don’t follow sound economic principles like diversifying our revenue sources and ensuring those revenue options that are available (like closing corporate loopholes) are fully explored. No wonder we face a billion-dollar budget deficit! Fortunately, Tennessee has options that could raise much-needed revenue and still provide a tax cut for the vast majority of its citizens.

The future of our state and communities is directly connected to how we deal with Tennessee’s ongoing budget shortfalls. Well-educated students, well-trained workers, a healthy environment and functioning infra-structures are the foundations of a strong economy. Now more than ever, the state must ensure those systems are able to respond; to provide encouragement and protection to those hardest hit in these times, and to pave the way for a robust recovery.

This is not the time to dismantle the structures and services we need to move our state forward. Any responsible approach to addressing the state’s funding issues requires a hard and balanced look at both how we spend money and how we bring it in. Fixing our flawed tax system and raising much-needed revenue needs to be part of that equation.
Tabeling is a board member of Tennesseans for Fair Taxation and executive director of Tennessee Conference on Social Welfare.
Copyright (C) 2010 by the Tennessee Editorial Forum. 1/10